The Three-Fund Portfolio

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bertilak
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Re: The Three-Fund Portfolio

Post by bertilak »

manlymatt83 wrote: Tue Oct 13, 2020 10:06 am For those holding VT/BNDW as part of the "three-fund" -- is it OK to hold VT/BNDW in both taxable and tax-advantaged so that rebalancing between VT and BNDW can only be done in tax advantaged and you never have to touch the taxable holdings?
Are you accumulating or decumulating? Depending, you can either use new investments or new (required?) distributions to maintain your AA.

If you are just coasting along and need to sell and buy to maintain your AA then what you are doing is a reasonable approach.
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Re: The Three-Fund Portfolio

Post by manlymatt83 »

bertilak wrote: Tue Oct 13, 2020 10:15 am
manlymatt83 wrote: Tue Oct 13, 2020 10:06 am For those holding VT/BNDW as part of the "three-fund" -- is it OK to hold VT/BNDW in both taxable and tax-advantaged so that rebalancing between VT and BNDW can only be done in tax advantaged and you never have to touch the taxable holdings?
Are you accumulating or decumulating? Depending, you can either use new investments or new distributions to maintain your AA.

If you are just coasting along and need to sell and buy to maintain your AA then what you are doing is a reasonable approach.
I am accumulating. My tax advangted space is limited (~$6000/year) so I will have to continue holding VT and BNDW in taxable for a large portion of my portfolio. Up until now, I have always avoided buying VT and BNDW ALSO in my tax advantaged ... just making sure that's a sane practice if I start doing that alongside my taxable holdings.

Hadn't thought about new contributions. You're right - I should be able to do that for at least a few more years, but at some point, new contributions may not be enough to complete a rebalance (one can hope).
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Re: The Three-Fund Portfolio

Post by lostdog »

manlymatt83 wrote: Tue Oct 13, 2020 10:06 am For those holding VT/BNDW as part of the "three-fund" -- is it OK to hold VT/BNDW in both taxable and tax-advantaged so that rebalancing between VT and BNDW can only be done in tax advantaged and you never have to touch the taxable holdings?

I realize VTI/VXUS has a lower expense ratio and the benefit of the foreign tax credit but for simplicity I would just like to hold VT in all accounts. Just making sure there's nothing I'm missing about holding it in multiple accounts. Thanks!
Hold just VT in taxable and VT+BNDW in tax-advantaged for tax-efficient placement of funds. Make sense?

You'll re-balance in your tax-advantaged accounts.

https://www.bogleheads.org/wiki/Tax-eff ... _placement
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Re: The Three-Fund Portfolio

Post by manlymatt83 »

lostdog wrote: Tue Oct 13, 2020 10:21 am
manlymatt83 wrote: Tue Oct 13, 2020 10:06 am For those holding VT/BNDW as part of the "three-fund" -- is it OK to hold VT/BNDW in both taxable and tax-advantaged so that rebalancing between VT and BNDW can only be done in tax advantaged and you never have to touch the taxable holdings?

I realize VTI/VXUS has a lower expense ratio and the benefit of the foreign tax credit but for simplicity I would just like to hold VT in all accounts. Just making sure there's nothing I'm missing about holding it in multiple accounts. Thanks!
Hold just VT in taxable and VT+BNDW in tax-advantaged for tax-efficient placement of funds. Make sense?

You'll re-balance in your tax-advantaged accounts.

https://www.bogleheads.org/wiki/Tax-eff ... _placement
Ahh! Got it, that makes sense. The hope here would be that I would never need to hold more BNDW than what I can fit in my IRA?
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Re: The Three-Fund Portfolio

Post by lostdog »

manlymatt83 wrote: Tue Oct 13, 2020 10:28 am
lostdog wrote: Tue Oct 13, 2020 10:21 am
manlymatt83 wrote: Tue Oct 13, 2020 10:06 am For those holding VT/BNDW as part of the "three-fund" -- is it OK to hold VT/BNDW in both taxable and tax-advantaged so that rebalancing between VT and BNDW can only be done in tax advantaged and you never have to touch the taxable holdings?

I realize VTI/VXUS has a lower expense ratio and the benefit of the foreign tax credit but for simplicity I would just like to hold VT in all accounts. Just making sure there's nothing I'm missing about holding it in multiple accounts. Thanks!
Hold just VT in taxable and VT+BNDW in tax-advantaged for tax-efficient placement of funds. Make sense?

You'll re-balance in your tax-advantaged accounts.

https://www.bogleheads.org/wiki/Tax-eff ... _placement
Ahh! Got it, that makes sense. The hope here would be that I would never need to hold more BNDW than what I can fit in my IRA?
Correct. :beer

VT+BNDW is such a simple and diversified portfolio. :sharebeer
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Re: The Three-Fund Portfolio

Post by manlymatt83 »

lostdog wrote: Tue Oct 13, 2020 10:31 am
manlymatt83 wrote: Tue Oct 13, 2020 10:28 am
lostdog wrote: Tue Oct 13, 2020 10:21 am
manlymatt83 wrote: Tue Oct 13, 2020 10:06 am For those holding VT/BNDW as part of the "three-fund" -- is it OK to hold VT/BNDW in both taxable and tax-advantaged so that rebalancing between VT and BNDW can only be done in tax advantaged and you never have to touch the taxable holdings?

I realize VTI/VXUS has a lower expense ratio and the benefit of the foreign tax credit but for simplicity I would just like to hold VT in all accounts. Just making sure there's nothing I'm missing about holding it in multiple accounts. Thanks!
Hold just VT in taxable and VT+BNDW in tax-advantaged for tax-efficient placement of funds. Make sense?

You'll re-balance in your tax-advantaged accounts.

https://www.bogleheads.org/wiki/Tax-eff ... _placement
Ahh! Got it, that makes sense. The hope here would be that I would never need to hold more BNDW than what I can fit in my IRA?
Correct. :beer

VT+BNDW is such a simple and diversified portfolio. :sharebeer
Agreed and awesome - thank you!
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Taylor Larimore
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"Building A Three Fund Portfolio [The Super Simple Investing Strategy]"

Post by Taylor Larimore »

Bogleheads:

"Invested Wallet" recently published a nice article praising The Three-Fund Portfolio.

Building A Three Fund Portfolio [The Super Simple Investing Strategy]

Enjoy!

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Three-Fund Portfolio Articles

Post by Taylor Larimore »

Bogleheads:

It pleases me whenever I read an article recommending The Three-Fund Portfolio. This Reply will bring them all together in a single post:

"A Boglehead Explains the Simplest Way to Manage Your Money"--MarketWatch

"The Bogleheads' Guide to The Three-Fund Portfolio" by Four Pillar Freedom

"The Bogleheads' Guide to the Three-Fund Portfolio" by Rick Van Ness

"The BigLaw Investor Portfolio" by Joshua Hunt

"Bogleheads Three-Fund Portfolio Review" by Optimized Portfolio

"Building A Three-Fund Portfolio" by Investment Wallet

"Efficient Investing with the Three Fund Portfolio" by Mr. Crazy Kicks

"From 28 Funds to 3: Simplifying to a Three-Fund Portfolio" by Physician On Fire

"How The Bogle (3-fund) Model Beats the Yale Model" by Ben Carlson

"How To Create A Three-Fund Portfolio" by Camilo Maldonado, Forbes

"How To Simplify Your Investing Using Only Three Funds" by Debt Free Doctor

"He Has Read 250 Investing Books and Recommends the Three Fund Portfolio" by Physician on Fire

"How To Diversify With Just Three Mutual Funds" by Ambassador Laura Dogu, Forbes

"Most Investors Probably Won’t Outperform This Simple (three-fund) Portfolio" Morningstar

"The Only Three Vanguard Funds You Need to Build a Portfolio" by Kent Thune

"Investing Should Be Simple. A Three-Fund Portfolio Is All You Need." by Allan Roth, AARP

"If You Can. How Millennials Can Get Rich Slowly" -- Free book by Wm. Bernstein

"Next to Nothing" by Jonathan Clements

"Review of Bogleheads Guide to the Three Fund Portfolio" by The White Coat Investor

"The Simple Magic of Investing In A Three-Fund Portfolio by BestWalletHacks

"Simplify Your Investments With The 3-Fund Portfolio" by Alicia Adamczyk

"The Three-Fund Portfolio. Living the Simple Life." by Morningstar

"The Three Fund Portfolio: The Lazy Investing Strategy that Crushes the Pros" by The Money Wizard

"The Three-Fund Investment Portfolio: The Beauty of Simplicity" by Mama Fish Saves

"Three Fund Portfolio: Did Awesomeness Find Trinity?" by Portfolio Einstein

"Three Fund Portfolio – Investing Made Easy" by The Finance Twins

"3 Fund Portfolio Investment Strategy: The Only Time Lazy is Cool" by Dr Breathe Easy Investing

"3 Fund Portfolio: The Lazy Way To Invest" by Just Start Investing

"The Three-Fund Portfolio" -- Boglehead wiki

"The Three Fund Portfolio: A Simple Diversified Investing Strategy" by Bible Matters

"The 3 Fund Portfolio: Simple Investing That Works" by Clevergirl Finance

"Three Mutual Funds That End The Guesswork" by Jonathan Burton MarketWatch

"Why (3) Index Portfolios Win" by M.P. Dunleavey

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by LadyGeek »

Thanks! Your post is in the wiki. See: Three-fund portfolio (External links)
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Re: Three-Fund Portfolio Articles

Post by abuss368 »

Taylor Larimore wrote: Mon Oct 26, 2020 9:39 pm Bogleheads:

It pleases me whenever I read an article recommending The Three-Fund Portfolio. This Reply will bring them all together in a single post:

"A Boglehead Explains the Simplest Way to Manage Your Money"--MarketWatch

"The Bogleheads' Guide to The Three-Fund Portfolio" by Four Pillar Freedom

"The Bogleheads' Guide to the Three-Fund Portfolio" by Rick Van Ness

"The BigLaw Investor Portfolio" by Joshua Hunt

"Bogleheads Three-Fund Portfolio Review" by Optimized Portfolio

"Building A Three-Fund Portfolio" by Investment Wallet

"Efficient Investing with the Three Fund Portfolio" by Mr. Crazy Kicks

"From 28 Funds to 3: Simplifying to a Three-Fund Portfolio" by Physician On Fire

"How The Bogle (3-fund) Model Beats the Yale Model" by Ben Carlson

"How To Create A Three-Fund Portfolio" by Camilo Maldonado, Forbes

"How To Simplify Your Investing Using Only Three Funds" by Debt Free Doctor

"He Has Read 250 Investing Books and Recommends the Three Fund Portfolio" by Physician on Fire

"How To Diversify With Just Three Mutual Funds" by Ambassador Laura Dogu, Forbes

"Most Investors Probably Won’t Outperform This Simple (three-fund) Portfolio" Morningstar

"The Only Three Vanguard Funds You Need to Build a Portfolio" by Kent Thune

"Investing Should Be Simple. A Three-Fund Portfolio Is All You Need." by Allan Roth, AARP

"If You Can. How Millennials Can Get Rich Slowly" -- Free book by Wm. Bernstein

"Next to Nothing" by Jonathan Clements

"Review of Bogleheads Guide to the Three Fund Portfolio" by The White Coat Investor

"The Simple Magic of Investing In A Three-Fund Portfolio by BestWalletHacks

"Simplify Your Investments With The 3-Fund Portfolio" by Alicia Adamczyk

"The Three-Fund Portfolio. Living the Simple Life." by Morningstar

"The Three Fund Portfolio: The Lazy Investing Strategy that Crushes the Pros" by The Money Wizard

"The Three-Fund Investment Portfolio: The Beauty of Simplicity" by Mama Fish Saves

"Three Fund Portfolio: Did Awesomeness Find Trinity?" by Portfolio Einstein

"Three Fund Portfolio – Investing Made Easy" by The Finance Twins

"3 Fund Portfolio Investment Strategy: The Only Time Lazy is Cool" by Dr Breathe Easy Investing

"3 Fund Portfolio: The Lazy Way To Invest" by Just Start Investing

"The Three-Fund Portfolio" -- Boglehead wiki

"The Three Fund Portfolio: A Simple Diversified Investing Strategy" by Bible Matters

"The 3 Fund Portfolio: Simple Investing That Works" by Clevergirl Finance

"Three Mutual Funds That End The Guesswork" by Jonathan Burton MarketWatch

"Why (3) Index Portfolios Win" by M.P. Dunleavey

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thanks Taylor! I have read and enjoyed most of these. There are many benefits to the Three Fund Portfolio and investors would be wise to consider this advice.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by abuss368 »

I just noticed that this thread has achieved over 3,000 posts!

Congrats Taylor and job well done!
John C. Bogle: “Simplicity is the master key to financial success."
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Three-Fund & Two Fund Portfolios

Post by Taylor Larimore »

abuss368 wrote: Tue Oct 27, 2020 10:53 pm I just noticed that this thread has achieved over 3,000 posts!

Congrats Taylor and job well done!
abuss368:

I appreciate your support. I might add that your Two-Fund Portfolio recommended by both Jack Bogle and Warren Buffett is looking better and better.

Lesson learned: A simple 2-fund or 3-fund total market index portfolio, properly allocated between stocks and bonds, is a worry-free way to achieve our goals. Both provide the many benefits listed here.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "I favor the all-market index index fund as the best choice for most investors."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by retire2022 »

all Vanguard is the largest fund manager, $5,442 Billion and number 1:

https://www.institutionalinvestor.com/a ... -Gut-Punch

"Active Managers Are Having a Rough 2020. Here’s Another Gut Punch.

October’s heavy outflows bumped Dimensional Fund Advisors from the top 10 U.S. fund families, according to Morningstar.

Christine Idzelis

November 13, 2020

Active managers took another hard hit as investors fled U.S. equity funds last month.

Investors pulled $46 billion from the mutual funds and exchange-traded funds focused on U.S. stocks, the second-highest monthly outflows ever after August, according to a Morningstar report this week. While actively managed and passive strategies each “felt the sting of outflows in October,” the research firm said “outflows are hitting active managers much harder.”

Investor withdrew about three times as much capital from actively managed U.S. equity funds, leaving passive strategies with about $300 billion more in assets for a total of $4.8 trillion in the category at the end of October, the report shows. Passive funds have been winning over investors as active managers charge higher fees despite failing to persistently outperform."
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Re: The Three-Fund Portfolio

Post by ruralavalon »

retire2022 wrote: Sat Nov 14, 2020 2:12 am all Vanguard is the largest fund manager, $5,442 Billion and number 1:

https://www.institutionalinvestor.com/a ... -Gut-Punch

"Active Managers Are Having a Rough 2020. Here’s Another Gut Punch.

October’s heavy outflows bumped Dimensional Fund Advisors from the top 10 U.S. fund families, according to Morningstar.

Christine Idzelis

November 13, 2020

Active managers took another hard hit as investors fled U.S. equity funds last month.

Investors pulled $46 billion from the mutual funds and exchange-traded funds focused on U.S. stocks, the second-highest monthly outflows ever after August, according to a Morningstar report this week. While actively managed and passive strategies each “felt the sting of outflows in October,” the research firm said “outflows are hitting active managers much harder.”

Investor withdrew about three times as much capital from actively managed U.S. equity funds, leaving passive strategies with about $300 billion more in assets for a total of $4.8 trillion in the category at the end of October, the report shows. Passive funds have been winning over investors as active managers charge higher fees despite failing to persistently outperform."
It's unclear whether the rankings are only for funds investing in U.S. stocks.
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Re: The Three-Fund Portfolio

Post by Register44 »

With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM
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Re: The Three-Fund Portfolio

Post by tj »

Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM

VT has been around much longer than BNDW
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Re: The Three-Fund Portfolio

Post by Register44 »

tj wrote: Tue Dec 01, 2020 5:10 pm
Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM

VT has been around much longer than BNDW
True. But the reason I mention it, is it was formed after OP's post using VTI and VXUS. So for the OP it takes 2 funds down to 1. I decided to go with BNDW instead of BND to stay global. Then added gold for real asset diversification.
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"Three Proofs That TSM is Efficient"

Post by Taylor Larimore »

Register44 wrote: Tue Dec 01, 2020 5:23 pm
tj wrote: Tue Dec 01, 2020 5:10 pm
Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM
Register44:

The stocks in GLDM (SPDR Gold MiniShares) do not add diversification to The Three-Fund Portfolio, they increase concentration. The market-weight of gold stocks is ALREADY in the Total Stock Market Index Fund.

Three Proofs That TSM is Efficient

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The odds of outpacing an all-market index fund are, well, terrible.
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Three Proofs That TSM is Efficient"

Post by Register44 »

Taylor Larimore wrote: Tue Dec 01, 2020 6:00 pm
Register44 wrote: Tue Dec 01, 2020 5:23 pm
tj wrote: Tue Dec 01, 2020 5:10 pm
Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM
Register44:

The stocks in GLDM (SPDR Gold MiniShares) do not add diversification to The Three-Fund Portfolio, they increase concentration. The market-weight of gold stocks is ALREADY in the Total Stock Market Index Fund.

Three Proofs That TSM is Efficient

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The odds of outpacing an all-market index fund are, well, terrible.
I just threw out GLDM, but you could use BAR,SGOL, AAAU, gold coins in your pocket ect.

Gold Bullion is not the same as gold mining companies. With that said I totally agree about not including GDX the same as VNQ as VTI/VT has you covered.

But we can't pretend that any type of stock market index is positioned for all economic environments. It does very well in prosperity, as do bonds. We hold both since bonds especially treasuries do well in times of deflation. There is not much we can do about recession. But inflation is a terrible period for stocks and bonds. That is why gold adds portfolio diversification.

There are other real asetts you can add if you don't like gold. Chris cole's dragon portfolio included gold, commodities, and long volatility to stocks and bonds.

Meb Faber did some research into different portfolios and concludes some real asset exposure is the key. He included TIPS in the real category. That surprised me since clearly it is a bond, but it is tied to inflation and would gain in value whereas most bonds would do poorly in that environment.

The simplest of course is HB 4x25. If one wanted to go global it might look like 25%VT 25%BNDW 25%gold(your choice how you hold it) 25% tbills. Maybe need to split some of that BNDW 25% to include EDV to keep the duration longer so the bonds have more power to zig and zag with stocks and gold though. Original PP holds only long term treasuries of course ala TLT.

PP seems to be the easiest to implement because commodities and long volatility have that futures roll cost.
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

Register 44 wrote:But inflation is a terrible period for stocks and bonds.
Register 44:

A combination of stocks and bonds in the late 70s (when U.S. suffered severe inflation) provided positive nominal returns. Those who stayed the course with a three-fund portfolio were well rewarded.

Historical Returns

More money has been lost worrying about inflation than has been lost at the point of a gun.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by abuss368 »

Register44 wrote: Tue Dec 01, 2020 5:23 pm
tj wrote: Tue Dec 01, 2020 5:10 pm
Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM

VT has been around much longer than BNDW
True. But the reason I mention it, is it was formed after OP's post using VTI and VXUS. So for the OP it takes 2 funds down to 1. I decided to go with BNDW instead of BND to stay global. Then added gold for real asset diversification.
Adding Gold to the Three Fund Portfolio is not increasing diversification. The market weight of Gold companies is included in the total market index funds.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by Register44 »

abuss368 wrote: Tue Dec 01, 2020 7:46 pm
Register44 wrote: Tue Dec 01, 2020 5:23 pm
tj wrote: Tue Dec 01, 2020 5:10 pm
Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM

VT has been around much longer than BNDW
True. But the reason I mention it, is it was formed after OP's post using VTI and VXUS. So for the OP it takes 2 funds down to 1. I decided to go with BNDW instead of BND to stay global. Then added gold for real asset diversification.
Adding Gold to the Three Fund Portfolio is not increasing diversification. The market weight of Gold companies is included in the total market index funds.
I think I realize my error. I should have better specified "asset class diversification" Gold mining stocks are still equities. Gold bullion is a commodity. Separate classes. Just as XOM is not the same as crude oil. A lot of us think of them as being good proxies, but still they are not the same asset class.

edit: Further I want to clarify I 100% agree TSM US / World is the way to go for the "equity" exposure of a portfolio.
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Re: The Three-Fund Portfolio

Post by 000 »

Register44 wrote: Tue Dec 01, 2020 4:52 pm With the formation of VT we can further diversify the 3 fund with: VT,BNDW, GLDM
I like the way you think 8-)

For those upthread, there is no overlap between the underlying holdings of GLDM and of total market stock funds.
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